As expected, the government on Thursday announced cuts to the subsidies given to large-scale solar photovoltaic installations. The cuts were introduced in a bid to ensure that the money assigned to the feed-in tariffs (Fits) programme for the period of the current parliament didn't get quickly eaten up by large investor-driven solar systems, leaving nothing for householders and small community projects. As Greg Barker told me last week, "the focus of the current scheme needs to be on the small scale, to get the maximum number of installations".

Given that the total amount of money that can be given out via the Fits is capped, skewing the scheme in favour of small systems is reasonable, but two important questions remain unanswered. First, given the rate of small-scale installations, how long will the Fits funding pot last? Second, why is there a cap in the first place?

The government line on the first of these question is that the issue will be explored during the comprehensive review of the feed-in tariffs, which is already underway. The initial tariff rates were always intended to last only until April 2012, and from that date the rates can be tweaked downwards to ensure that the scheme doesn't exceed its spending cap. The rates "will come down", Barker confirmed when we spoke last week.

But industry insiders claim there's a crisis brewing. Ray Noble, solar specialist for the Renewable Energy Association, says that small and medium-sized systems are going up so fast that – despite yesterday's announcement – virtually the entire budget for the feed-in tariffs could be used by the middle of next year. By then, he says, "it's unlikely they'll have much budget, and there may be no feed-in tariff".

If Noble is correct, the implication for anyone thinking of installing solar at home over the next few years is clear: do it now or risk getting locked out. The message for the solar industry is even starker: be prepared for the possibility that Fits money could dry up completely or almost completely much sooner than thought.

All of which raises the second question: why is there a cap on Fits spending anyway?

The cap was introduced by the coalition as part of last year's government-wide spending review. (The scheme is actually funded by a levy on electricity bills, rather than directly from the coffers of the Department for Energy and Climate Change (Decc), but it's still considered a form of tax and spending, and therefore was reviewed along with the rest of government expenditure.) As far as I can gather, the government line is that a £900m budget was allocated to the Fits when Labour originally set up the scheme in 2010, and all the coalition did was to trim 10% from the part of that budget intended for 2014-15 – a modest concession in the context of much deeper cuts in other areas.

But Labour and the solar industry claim this line is misleading, as the £900m was never intended to be a cap. Shadow energy minister, Huw Irranca-Davies, confirms this. "No cap existed before", he said. "It was an indicative amount, subject to review across Whitehall depending on take-up."

Howard Johns, chair of the Solar Trade Association, claims that the coalition's decision to turn this indicative figure into a hard cap "was pushed through without consultation, based on a spreadsheet that no one had seen".

Why did this happen? Pressure from the Treasury to reduce all public spending is the most obvious answer, but according to some sources the situation was made worse by incompetence within Decc, which would not comment on the 'why' beyond talking about the need to prevent excessive energy bill rises and reiterating that there had been no cap before October's spending review.

During our interview last week, Barker said he would be gathering senior staff from across Decc to reappraise solar in light of developments in cost and technology, and to think creatively about "new pathways" for supporting large-scale solar projects. If the Fits budget does run out sooner than expected, the same team may also find themselves brainstorming new ways to support domestic-scale solar, too – unless, that is, Greg Barker can persuade George Osborne to unlock some extra cash. I wonder what his chances are.